I love irony. No sooner had I discussed with a colleague about the time I worked for a couple of McKinsey alums than I received an email promoting a new study undertaken by, you guessed it, McKinsey. Actually the McKinsey Global Institute (MGI). The paper’s authors researched global supply chains very timely in light of the Covid-19 pandemic. The report highlights vulnerabilities in global supply chains and how resilience takes priority, calculating ongoing cost of shocks and prospects for production to shift.
In brief:
Industries experience month-long disruptions every 3.7 years on average
Companies can expect supply chain disruptions to erase 40 percent of a year’s profits over the course of a decade on average—and extreme events take an even bigger toll
Up to a quarter of global trade flows could move to different countries over the next five years if companies restructure their supplier networks and governments take action. But moving supply chains is not the only way to build resilience.
The idea of chasing low-cost labor across the globe while ignoring supply chain risks and costs always seemed goofy to me. For, I didn’t waste my years as the unofficial chief manufacturing cost analyst for a medium-sized manufacturer. But here is some weighty analysis that emphasizes the risks.
The stakes are high, according to Risk, resilience, and rebalancing in global value chains, a new report from the McKinsey Global Institute (MGI). MGI analyzed 23 industry value chains to assess their exposure to specific types of shocks, including pandemics, conflicts, cyberattacks, trade wars, natural disasters, and climate risks. Industries have different exposure to these shocks based on their geographic footprint, factors of production, and other variables.
Based on the frequency and cost of disruptions, MGI scenarios show companies in most industries can expect shocks to erase 45 percent of one year’s EBITDA on average over the course of a decade. A single extreme event could cause even bigger financial losses. On top of this bottom-line impact comes the additional cost of rebuilding damaged physical assets, losing market share to competitors that are able to sustain operations, and significant societal harm such as loss of life, loss of jobs, shortages of critical goods, and damage to communities.
Geographic concentration can often produce supply chain bottlenecks when a shock hits. MGI finds 180 goods that are exported primarily from just one country, worth $135 billion in trade annually. Another issue is that large multinationals can have thousands of suppliers—but most have little visibility beyond the top tier of those tightly interconnected networks.
Will companies restructure their supply chains as part of a flight to safety? Yes and no, the report finds. There is an economic logic behind the way industry value chains have evolved. Given the scale, complexity, and interconnectedness of value chains, they are harder to move than is commonly realized.
MGI estimates that 15 to 25 percent of global goods exports, worth $2.9 trillion to $4.6 trillion annually, could conceivably move to new countries over the next five years. This is based on both economic factors, such as the cost of relocating production, and non-economic factors, such as governments changing policy to promote domestic production of goods deemed essential or important to national economic security.
“The prospect of a significant geographic rebalancing in global supply chains represents a risk for the companies and countries that might lose out—but a potentially significant opportunity for those that manage to capture a share of this production. This could have important consequences for future growth and employment,” says Susan Lund, a partner at the McKinsey Global Institute. “But supply chains involve thousands of independent firms, reflecting specialization, access to consumer markets around the world, substantial sunk costs, and long-standing relationships. Relocating is not a simple task.”
To attracting more production, countries need to develop strong supplier ecosystems, specialized workforce skills, robust infrastructure, and an attractive business environment.
There is more to resilience than changing where goods are made, however. Operational choices and the structure of a company’s supplier network can heighten or lessen vulnerability to disruptions. Common practices such as sourcing from a single supplier, relying on customized inputs with few substitutes, and carrying substantial debt can magnify the financial impact of a shock if they are not calibrated to account for current levels of risk.
Among the steps companies can take are mapping the sub-tiers of their supply chains in detail and connecting them digitally for better transparency; building the capacity to flex production across multiple sites; holding more inventory; and strengthening their balance sheets.
The COVID pandemic is prompting action at a time when cost structures are changing across countries and revolutionary digital technologies are gaining traction in global manufacturing.
“Supply chain shocks are not a new phenomenon, but only a handful of leading companies have really moved to minimize their risk until now,” says Katy George, senior partner and global leader of McKinsey’s operations practice. “That’s largely because of a perception that resilience has to come at the cost of efficiency. But that’s no longer true. Now companies have new tools at their disposal to become more resilient and more productive.”
This week I am attending the Festo Virtual Trade Show and Conference . The website provider is the same one as the Danish company I “toured” last week. It is similar to a concept I saw 20 years ago, but modern technology and design have made the experience very good.
I sat in a couple of conference sessions deepening my understanding of the latest in pneumatics and digitization. The discussion of digitizing and motion was good showing examples from OEE and energy savings. I am not a fan of OEE, but many companies seem fixated on it. It is a number–but I learned how the sausage was made 30 years ago and I remain unconvinced of its real utility. However, if you can digitize to calculate OEE, then you have data you could use in better ways for decision making.
I also learned about applications in process and water treatment.
The metaphor is a trade show lobby with doors for the auditorium for conference sessions, the show floor, information booth. Entering the show floor, there are a number of icons representing booths. Click on a booth and you can choose from short video demonstrations, downloadable papers, and product overviews.
You can attend yet today. It’s worth a look to see what perhaps may be a chunk of the future. I miss the energy and serendipity of live events. But this is an efficient way to collect information saving both the exhibitor and me great expense.
Organizations and companies have been exploring how to do a virtual trade show for more than 20 years. I can remember the early efforts…and shudder. However, we now have a “witch’s brew” of pandemic, increasing bandwidth, improved interactive graphics, browser advances such as HTML 5 and more which have coalesced into a good user experience. If they could replicate the hallway conversations and chance meetings, perhaps some travel could be eliminated. But I still prefer being there.
Yesterday robot industry veteran Joe Campbell, who is now sr. manager of applications development with Universal Robots, gave me a tour of the UR Cobot Expo. It is officially concluded, but you can still visit everything except for the chat functions for the next 30 days. And the expo is pretty cool. Pandemic restrictions have forced creativity upon marketers and designers, and most of the events I have attended have been well worth the time. Certainly this one is if you have any interest in exploring this technology area at all.
“The Cobot Expo” offers American manufacturers flexible automation solutions with a rich experience with an extensive range of product news and demonstrations, featuring more than 30 different booths, insightful keynotes, interactive QAs, and live chats with automation experts (these latter are not active now).
As I’ve written before, the COVID-19 pandemic has made it clear that resilient businesses—those that can emerge with plans for growth—can react quickly and decisively to protect workers while keeping business running, adapting processes and product lines, with many manufacturers now increasingly using collaborative robots to make those changes efficiently and cost-effectively.
“The crisis has accelerated the need for flexible automation,” says Campbell. “We’re seeing an uptick in interest for collaborative robots due to social distancing requirements, reshoring to avoid long supply chains, and the need for rapid production line change-overs. The Cobot Expo is a timely opportunity to showcase and discuss how cobots can play a pivotal role in helping manufacturers successfully navigate the pandemic.”
The Cobot Expo is free to attend and is open for anyone with an interest in collaborative robotics (on demand only now). Attendees are invited to visit booths that feature new insights and resources on the most common cobot applications such as machine tending, packaging and palletizing, product inspection, assembly, welding, dispensing, and finishing. Joining this lineup is ActiNav, the world’s first autonomous bin picking kit for machine tending launched by Universal Robots this spring.
For expo visitors wondering how to get started with collaborative robots, numerous keynotes with live QAs will offer insights on critical topics such as how to identify good projects, choosing the right cobot model and peripherals, conducting risk assessment, whether to take a DIY approach or go with an integrator, and much more. The agenda also has presentations on cobot maintenance and programming and the many new ways cobots are quickly being deployed to address the COVID-19 crisis, including area disinfection, the manufacturing of test kits, face shields and ventilators, and in the handling of COVID-19 tests, protecting hospital staff from exposure.
The Cobot Expo is also an opportunity to meet the many UR+ partners presenting the industry’s largest and most comprehensive ecosystem of new products certified to integrate seamlessly with the UR cobots. The rapidly expanding UR+ platform now includes over 250 UR+ components and application kits with more than 400 approved commercial developer companies in the UR+ program.
The UR+ partner booths include: ATI Industrial Automation, Energid, Flexibowl, Flexxbotics, Hexagon, Mircopsi/Nvidia, New Scale Robotics, OnRobot, Piab, Robotiq, Schmalz, Schunk, SMC, Vectis, Vention, VersaBuilt, Visumatic, Wiretank, and Zimmer.
Alongside the UR+ partners will be booths hosted by Association for Advancing Automation (A3) and OEM partners showcasing products powered by UR cobots. The OEM partners include: Columbia Okura/Rocketfarm, Computech, Hirebotics, IRIS, Melton Machine, ONExia, and ProCobots/Easy Robotics.
“With tradeshows and conferences cancelled, we are experiencing phenomenal interest from all industry stakeholders in participating in the Cobot Expo,” says Campbell. “This truly is an extraordinary opportunity for an extraordinary time.”
Back in the 80s and perhaps before, I started listening to a radio personality/philosopher called Earl Nightingale. His recording of The Strangest Secret became the first gold album for a talking program (rather than music). He was still in his 20s when he discovered the core understanding that drove the rest of his life–you become what you think about.
He had another pet theme that I thought made sense–hydrogen as fuel. It is plentiful. Its combustion by-product is water. What’s not to like (other than a huge infrastructure devoted to another fuel).
Those days are returning. Several articles have popped onto my radar screen in the past week trumpeting the theme of hydrogen as fuel.
I sense business opportunities for some business-savvy engineers.
John Dyck is now CEO of CESMII, a US government initiative promoting Smart Manufacturing. I worked with him some at MESA International and in his previous role at Rockwell Automation. He sent me this note the other day, “I wanted to share with you a link to a recording of a Congressional Briefing (virtual) that I participated in (with ASME) on rethinking the manufacturing supply chain. My contributions start at the10:20mark and are ~10 minutes.This is part of a significant initiative that we’ve started here, which you see in the final 2 minutes of my presentation.” There are few people in Congress with any kind of science or engineering background. Let alone manufacturing and production. I hope they take the time to watch and learn.
Unlike the initiatives in Germany and China that have the full support from the top of the government, American government might fund initiatives such as CESMII, but as far as the top reaches of Congress and the administration are concerned, the outcomes are more along the lines of wishing and anxiety.
If you are American and involved in this area, listen and see where you might help. If you are outside America, you’ll find it interesting what we’re working on.
Digital enables so many useful applications leading to better products, better plants, better management decisions. Without digital from the very beginning of the process until the final use, where would the usefulness of digital twins, digital threads, and even digital transformation lie.
Not really within my area of expertise, generative design is a design exploration process. Designers or engineers input design goals into the generative design software, along with parameters such as performance or spatial requirements, materials, manufacturing methods, and cost constraints. The software explores all the possible permutations of a solution, quickly generating design alternatives. It tests and learns from each iteration what works and what doesn’t.
Autodesk is making it easier for customers to take advantage of all that generative design affords with the new Fusion 360 Generative Design Extension subscription offering. To help Fusion 360 users extend their design exploration capabilities on a regular basis, we’re offering unlimited access to the generative design functionality as a separate subscription, at either $1,000 monthly or $8,000 annually.
To enable even more customers to explore the benefits and advantages of generative design – including improved product performance, increased productivity, and reduced production costs – we’re offering special introductory pricing for a limited time. Through July 17, annual subscriptions to Fusion 360 and the Generative Design Extension are available for 50% off the regular price.
For those who prefer to pay as they go, access to the generative design extension will continue to be available using Autodesk Cloud Credits.
“We hear loud and clear that customers, especially these days, crave flexibility, and we’re more than happy to provide a solution at a price point that addresses their needs, especially for budget managers who require predictability,” said Stephen Hooper, vice president and general manager, Fusion 360. “Most of all, we’re excited to see the momentum and incredible outcomes from casual users all the way up to major industry innovators or major brand innovators who are using generative design in the field.”
We’re building our library of extensions to help Fusion 360 customers access specialized functionality, how and when they need it. Last year, we announced the Manufacturing Extension to amplify our customers’ manufacturing capacity with speed-boosting automation and increased control of machines and processes.
Notable customer applications of generative design include a crankshaft redesigned to be 50% lighter by Honda’s R&D team, wheels for a supercar from Briggs Automotive Company, and a successful effort by MJK Performance to manufacture lighter and stronger triple clamps for drag bikes. These customers are proof that needs and levels of use come in all shapes and sizes.
